1、1PitchBook Data,Inc.Nizar Tarhuni Executive Vice President of Research and Market IntelligenceDylan Cox,CFA Head of Private Markets ResearchInstitutional Research GroupAnalysis2025 US Venture Capital OutlookOur analysts outlook on the venture market in 2025PitchBook is a Morningstar company providin

2、g the most comprehensive,most accurate,and hard-to-find data for professionals doing business in the private markets.PublishingDesigned by Julia MidkiffPublished on December 16,p.2The demand-supply imbalance for late-and venture-growth-stage companies will remain above 2016-2020 trend averages.p.4Va

3、luation growth for the market will rebound.p.7An acute need for liquidity generation will spur an increase in acquisitions.p.9Unicorn IPOs will propel growth in venture exit value.p.12The secondary market will expand due to increasing demand.p.14Distribution yields will increase for the first time s

4、ince 2021.p.16VC fundraising activity will surpass 2024 levels.2025 outlooksKyle Stanford,CAIA Lead Analyst,Venture Capital Emily Zheng Senior Analyst,Venture Capital Kaidi Gao Analyst,Venture Capital Susan Hu Associate Quantitative Research Analyst Collin Anderson Data Analyst 22025 US Venture Capi

5、tal OutlookIntroductionOur outlook for US venture in 2025 is relatively stronger than what the market has produced in the past few years.Exits are projected to increase,and a moderate uptick in the number of large tech companies hitting public markets should be a major boost to exit value.That will

6、then increase distributions and provide LPs with the liquidity they need to reinvest into the strategy or balance their overall portfolio.We have long said that dry powder would continue to stabilize dealmaking,and it largely did at seed and early-stage deals.Not all those deals were a win for every

7、onesome mixed with dilutive structures or raised at significantly lower valuationsbut there were deals getting done.Market conditions should favor VC in some areas,but the bar of improvement is low.The Federal Reserves(the Feds)rate cut in September started the path forward.Assuming inflation remain

8、s low and keeps pace for further cuts,then markets should react accordingly,and we should see more risk appetite enter public markets,enticing tech companies with the idea that now is better than never.There remains uncertainty in the market,and potential increases for macroeconomic-volatility-creat

9、ing events may continue to occur.With a re-elected Trump administration,proposed tariffs on imported goods from countries like China and Mexico could rile markets.The administrations handling of the wars in Ukraine and the Middle East,not to mention elevated US-China tensions,are also poised to indu

10、ce marketmovement.The US economy is set up relatively well moving into 2025.Inflation has been on track to progress toward the Feds target level,public markets have experienced meaningful gains over the past year,GDP growth is around 2.5%and steady,and unemployment is reasonable.Corporate earnings h

11、ave also presented robustly in the market.In general,the economic indicators bifurcate from consumer confidence,which has been low and still has not recovered from pre-COVID-19 highs.Venture has marched to its own beat,though.AI has driven Wall Street interest and has resoundingly drawn the most VC

12、dollars.Late-stage and venture-growth deals have lagged in the last few years because of the lack of crossover investor capital flowing into VC.Those institutions felt the sting of the dried-up liquidity,but many opportunities exist for investment into companies waiting to IPO,and an increase in lis

13、tings should also loosen the grip on that capital.The last few years of pain for VC has likely helped flush the system of tourists for the moment,as well as the investors that were into VC because it was the“it”thing to do.As a team,our outlook on US VC is moderately positive for 2025.That does not

14、mean that challenges are gone.Flat and down rounds will likely continue at higher paces than the market is accustomed to.More companies will likely shut down or fall out of the venture funding cycle.However,both of those expectations are holdovers from 2021.We do not expect IPO counts to finish the

15、year anywhere near the roughly 200(not including SPACs)that occurred in 2021,but 40%of US unicorns have been held in portfolios for at least nine years,and that group accounts for more than$1 trillion in value.That is a figure that can quickly push exit values high and restart the VC machine.32025 U

16、S Venture Capital OutlookCapital demand-supply ratio by stage0 x0.5x1.0 x1.5x2.0 x2.5x3.0 x3.5x4.0 x20142015201620172018201920202021202220232024Early-stage VCLate-stage VCVenture growthSource:PitchBook Geography:US As of October 31,2024Susan HuAssociate Quantitative Research ARationaleFrom 2016 thro

17、ugh 2020,the average capital demand-supply ratio for the venture market was approximately 1.2x for late-stage companies and 1.4x for venture-growth-stage companies.This indicates that there was consistently more capital needed by startups than was being supplied by investors.Our venture capital dema

18、nd-supply ratio measures the balance between the capital deployed by VC firms and other market participants(capital supply)and the amount of startups seeking to raise capital(capital demand).A 1x ratio represents a balanced market where supply equals demand.However,for late-and venture-growth-stage

19、companies,estimated demand has typically exceeded supply,driven by their proximity to public markets.By 2023,the demand-supply ratio peaked at 3.5x for these companies,a significant imbalance wherein only$1 million was available for every$3.5 million demanded by startups,for example.This ratio captu

20、res the cyclical nature of the venture market.During the 2020-2021 boom,near-zero interest rates and an influx of nontraditional investors created unprecedented capital availability,pushing the ratio to a low of 0.6x for late-and venture-growth-stage companies by Q4 2021.As macroeconomic conditions

21、shifted,rising interest rates and inflation led to a retreat of nontraditional investors,quickly reversing the trend.By 2023,the demand-supply ratio surged to a peak of 3.5x,reflecting dwindling capital availability and heightened investor selectivity.This environment has particularly impacted more

22、mature startups,many of which raised large rounds during the 2020-2021 boom and now face challenges securing new funding at comparable valuations.A frozen exit environment has exacerbated these challenges,keeping many companies private.While some stronger startups have managed to raise capital,other

23、s have faced increasing financial pressure.Outlook:The demand-supply imbalance for late-and venture-growth-stage companies will remain above 2016-2020 trend averages.42025 US Venture Capital OutlookAs conditions improve,and with the expectation that there is a relatively stronger exit market,we expe

24、ct 2025 demand-supply ratios to meet or continue to trend above the 2016-2020 averages of 1.2x for late-stage companies and 1.4x for venture-growth-stage companies.Using the current inventory of deals,we project with the 2016-2020 historical averages that the observed deal value per month would need

25、 to reach approximately$15 billion for late-stage companies and$7 billion for venture-growth-stage companies.While an anticipated uptick in exit activity next year could restart the venture flywheel,the backlog of private companies and ongoing capital constraints suggest the recovery is likely to be

26、 gradual.We estimate that there are currently 18,000-plus late-stage and venture-growth companies in the inventory,accounting for 32.4%of VC-backed companiesof which at least 1,000 VC-backed companies have not raised another VC round since 2021.RisksA key risk lies in any significant changes that co

27、uld bring the market demand-supply closer to parity,shifting the ratio away from the expected imbalance.A rapid reopening of the exit market,driven by increased IPOs or M&A activity,could release the backlog of later-stage demand,increasing distributions back to LPs.Additionally,as nontraditional in

28、vestors offload part of their portfolio and as later-stage companies look to restructure in preparation for exit opportunities,strong potential exists for greater nontraditional investor participation into venture.Historically,VC funds that deployed capital during recovery phases have delivered stro

29、nger returns,further incentivizing re-entry into venture.Moreover,periods of high liquidity are often associated with faster deployment cycles.If nontraditional investors re-enter the market and traditional venture investors significantly increase deployment speeds,the anticipated imbalance above th

30、e 1.2x and 1.4x demand-supply ratio for late-and venture-growth-stage companies,respectively,may notmaterialize.Late-stage oversupply and undersupply by quarter with 2025 estimate0 x0.5x1.0 x1.5x2.0 x2.5x3.0 x3.5x-$6-$4-$2$0$2$4$6$8$10$12$14$16202020212022202320242025EOversupply/undersupply($B)Capit

31、al demand-supply ratioSource:PitchBook Geography:US As of October 31,2024 Note:Estimated demand is based on historical demand curves.52025 US Venture Capital OutlookKyle Stanford,CAIALead Analyst,VCRationaleCompanies are still being valued highly in the market.Notwithstanding the peaking interest in

32、 AI,most sectors continue to see the median valuation grow across stages.While roughly 30%of priced rounds are coming at flat or down valuations,it is easy to understand this dichotomy when measuring the speed and height of valuation growth during prior rounds.The median step-ups companies are attai

33、ning between rounds are gradually increasing back from the low points of 2023,though companies have taken significantly longer between financings than in the past.This length has driven annualized growth of valuations toward the ground.Several factors will play into increasing valuation growth for c

34、ompanies.For one,an exit resurgence,even marginally,will likely place a higher premium on VC-backed companies.At the same time,strong companies have continued to garner high conviction from investors,and as the market consolidates,those companies will likely command even more of a competitive pricin

35、g boost.We note below our belief that exits will begin to proliferate back into the market.The backlog of IPO contenders beginning to find liquidity will be a boost to the market in the form of capital able to be recycled into deals and funds,and positive momentum has been shown to boost spending fo

36、r private shares of companies.The S&P 500 has been the darling of 2024,with almost continuous growth powered by megacap companies.While it has remained in the background,small-cap growth stock returns have been less robust until recently,when they began to share in the postelection surge.The Russell

37、 2000 is near an all-time highthe first time it has flirted with a new high since 2021.Underlying the performance has been an expansion of small-cap growth revenue multiples,which bodes well for closing the gap between pricing expectations for highly valued private companies and public market invest

38、ors.Median RVVC by series0%20%40%60%80%100%120%140%20142015201620172018201920202021202220232024SeedABCD+Source:PitchBook Geography:US As of November 16,2024Outlook:Valuation growth for the market will rebound.62025 US Venture Capital OutlookOur PitchBook comp sheets reveal that trailing 12-month(TTM

39、)revenue multiples in 2024 have been significantly lower than historical norms for technologies such as enterprise software as a service(SaaS)and fintech.Even public AI businesses have not been immune from multiple compression.These depressed multiples have capped valuation expansion amid a slower r

40、evenue growth market.That a large majority of companies have continued to raise new valuations higher than their last highlights rosier economic conditions.The expectation that interest rates are cut further in 2025 should also induce pricing growth.A normalization of the revenue multiples will posi

41、tively impact the prices investors are able and willing to pay for private companies.Over the past few years,VC has also been plagued by too many companies vying for the same dollars.This has placed pricing power into the hands of investors and created market dynamics where market share has been fac

42、tored across a large number of companies,increasing customer acquisition costs and pressuring margins.Consolidation,whether through M&A or through company failures,will help reduce some of the costs that companies have already needed to be hyperaware while lengthening runway until the next investmen

43、t can be closed.These cost reductions for companies,alongside expanding multiples,will bring back valuation growth between financings,albeit toward more historical figures rather than the exuberant highs of 2021.RisksThe risks for a return of valuation growth for companies are nuanced.From a market

44、perspective,a continuation of poor exit opportunities will ruin the high expectations of investors,pressure their ability to continue investing in VC,and lower their expected returns projections.A group of established managers will be able to close new funds,supplying themselves with dry powder movi

45、ng forward.However,those firms would find a favorable pricing market should the large swath of managers without new funds currently be unable to raise.The high valuations of 2021 were due to several factors,one of which was the high number of market participants competing for deals.We expect down an

46、d flat rounds to remain elevated even if exits pick up.The overinvestment in VC during the zero-interest-rate-policy(ZIRP)years sent many companies into the VC lifecycle that will not be able to achieve the size and exit that VC needs.The too-high valuations of those years have also made it difficul

47、t for many companies to catch their revenues up to the prior valuation multiple.Because so many companies are in the VC inventory and many will find an underwhelming market because of that,there will be a relative amount of drag on market medians.72025 US Venture Capital OutlookKaidi GaoAnalyst,VCRa

48、tionaleOver the past two years,the M&A landscape for venture-backed startups has reflected sustained sluggishness.YTD,our dataset recorded 699 acquisitions of VC-backed companies.The annualized figure for 2024 is on track to dip slightly below the level of 2023,which itself was a slow year for exits

49、.Outsized mergers this year were few and far between,which was unsurprising given the heightened regulatory scrutiny and macroeconomic uncertainties that in turn challenged businessoptimism.A large proportion of the largest mergers and acquisitions closed during the year came from the healthcare sec

50、tor.YTD,the largest M&A deal was Roches$3.3 billion acquisition of Carmot Therapeutics,the size of which overshadowed the second-largest exit,ProfoundBios$1.8 billion acquisition by Genmab.This phenomenon can be attributed to industry particularities as well as the healthcare industry not experienci

51、ng the high valuation inflation of the tech sector,for example.In our VC Returns by Series:Part IV analyst note,we mentioned that,compared with their non-healthcare peers,biopharma and medical device companies are less impacted by the Federal Trade Commissions(FTCs)antitrust enforcement.A potential

52、shift in the regulatory landscape in the near to medium term may be a boon for large M&As.With the Trump administrations return to the White House,the predominant market view is that a less stringent,pro-business policy direction is underway.Current FTC Chair Lina Khan has been known for her commitm

53、ent to blocking mergers on the grounds of antitrust laws.While not all her litigation attempts ended up blocking a deal,those investigations and lawsuits served as a considerable deterrent that large corporations needed to weigh against potential benefits from acquiring a target.If Khan was to be re

54、placed by a successor with a more lax view on large mergers,the market may react to a more open regulatory environment by considering making more acquisitions.Share of VC exit count by type 0%20%40%60%80%100%20142015201620172018201920202021202220232024BuyoutPublic listingAcquisition10%30%50%70%90%So

55、urce:PitchBook Geography:US As of November 15,2024Outlook:An acute need for liquidity generation will spur an increase in acquisitions.82025 US Venture Capital OutlookWe expect increased momentum in VC-backed acquisitions in 2025,driven by a heightened sense of urgency to generate liquidity among GP

56、s,gradual convergence of price expectations between founders and buyers,as well as businesses seeking further expansion through inorganic growth.In the Q3 2024 PitchBook-NVCA Venture Monitor,we discussed how the lack of exits continued to weigh on LP liquidity positions.Both GPs and LPs have continu

57、ed to speak of the urgency for liquidity generation.LPs need for returns and capital recycling has manifested in GPs doubling down on the best-performing portfolio companies while trying to find homes for those unlikely to be an outsized success down the road.With a narrowed gap between buyer-seller

58、 price expectations,more founders have been willing to explore acquisitions as an exit strategy.Another factor that should drive more M&A is companies seeking growth from acquiring strategically aligned peers,especially now that the valuation level has become more attractive compared with a few year

59、s ago,making it easier for businesses to swallow the costs.With the“cash is king”mantra,corporations with ample cash reserves have an edge in price negotiations,as acquisition targets and existing investors typically agree to a discount in cash offers.The appetite for acquisitions could come from co

60、rporate senior executives or from PE firms facilitating add-on deals for their platform companies.For the latter case,a series of projected rate cuts later this year and in 2025 will be a tailwind for PE-backed acquisitions due to lower borrowing costs.RisksWhile lessened antitrust oversight will bo

61、ost consolidations among large players and further expansion for incumbents,headwinds for smaller acquisitions from the past few years may persist,thus hindering the prospect of a slew of acquisitions.In 2024,we observed a lack of smaller acquisitions,which are not subject to antimonopoly scrutiny a

62、nd are less affected by high borrowing costs.Major considerations for evaluating potential M&A opportunities,including integration costs,key employee retention in the case of a talent acquisition,as well as balancing near-and long-term value creation,point to corporate executives being highly cautio

63、us about making acquisitions.The overall emphasis on business fundamentals and unit economics as opposed to growth at all costs further sets the context for the slowdown in the M&A space and may carry forward in the coming quarters.Additionally,extrapolating from historical M&A patterns during elect

64、ion years,1 we might see a meaningful month-over-month uptick in the number of acquisitions closed in December,which would in turn boost the 2024 annual M&A exit volume and narrow the gap between 2024 and 2025 by M&A exit count.According to our Q3 2024 US PE Breakdown,the average M&A closed per mont

65、h during election years in the US tends to surge in December,suggesting that companies tend to delay acquisition closings as they navigate election uncertainties.If similar dynamics play out this year in VC-backed mergers and acquisitions,the annual M&A deal number will likely experience a boost fro

66、m closings announced in the last month of the year.1:This data tracks all M&A deals,not just VC-backed M&A.92025 US Venture Capital OutlookEmily ZhengSenior Analyst,VCRationaleThrough Q3 of this year,$68.9 billion has been generated in exit value,with public listings constituting 45.7%of that total.

67、Rather than focusing on the need for liquidity,which has already been examined in depth,this outlook focuses on the companies that should have been and need to be producing returns:unicorns.IPOs have historically led the creation of venture exit value,and the recent drought has locked up a large pro

68、portion of potential returns in an aging unicorn population.Five IPOs of venture-backed unicorns from the first three quarters of 2024Tempus AI,Reddit,Astera Labs,Rubrik,and Ibottahad a combined pre-money valuation of over$17 billion,and Pony.ais November IPO and ServiceTitans December IPO raised th

69、e total past$26 billion.These five listings alone made up nearly 25%of the Outlook:Unicorn IPOs will propel growth in venture exit value.Notable VC-backed unicorns likely to IPO in 2025Source:PitchBook Geography:US As of November 16,2024CompanyIPO probabilityMost recent post-money valuation($M)Compa

70、ny age(years)Industry sectorChime91%$25,000.012ITCoreWeave87%$23,000.07ITDiscord93%$14,700.012ITVAST Data94%$9,100.08ITHinge Health67%$6,200.010HealthcareLightmatter93%$4,400.07ITArctic Wolf95%$4,300.012ITPatreon93%$4,255.011B2BCerebras96%$4,250.08ITEquipmentShare97%$3,750.09B2BGrubMarket97%$3,600.0

71、10B2BFigure Technology Solutions9%$3,200.06ITWellhub93%$2,400.012B2BMNTN45%$2,019.015ITHarrys34%$1,700.012B2CTuro91%$1,280.015B2CKallyope94%$1,136.09HealthcareShipBob29%$1,125.010ITElement Biosciences94%$1,044.07HealthcareOmada95%$1,032.013Healthcare102025 US Venture Capital Outlookexit value throug

72、h Q3,further emphasizing their significance.However,over 43%of unicorns have been held in venture portfolios for at least nine years,a notable extension from pandemic-era highs due to the unfavorable exit environment and their continued ability to raise capital thanks to investor demand for top comp

73、anies.The current median unicorn age is 8.4 years since their first VC round,an increase from 6.4 years in 2021 when exits occurred more frequently.Without unicorn IPOs to provide windfalls of realized returns,the venture market has remained strained over the last few years.Simply forecasting that a

74、 flood of unicorns will finally exit in 2025 would be naive.The reality is that these companies will need to create liquidity for their investors,and secondary markets are not yet large enough to satisfy this need.Instead,we can create a theoretical list of companies likely to IPO with our VC Exit P

75、redictor model.2 For this outlook,we looked at VC-backed companies that are 6 years old and older with an IPO probability of 95%or higher and an Opportunity Score of 75%or higher,with the addition of startups that have already filed and the removal of any that have publicly announced that an IPO is

76、not in line with their near-term strategy.With this data,separate scenarios were created for unfavorable,base,and ideal cases for the upcoming IPO year.Our unfavorable scenario is that IPOs remain at the same level as 2024,which is a low bar,and would result in six unicorn IPOs with at least$20 bill

77、ion generated in exit value.Of the 20 notable unicorns that have filed confidentially or are rumored to go public in 2025,including CoreWeave,Cerebras,and other companies listed in the table,the median post-money valuation is$3.7 billion.Assuming their next rounds are public listings,then multiplyin

78、g this median with six IPOs leads us to about$22 billion generated,which falls above our assumed floor of$20 billion.Of course,it is possible that only small unicorns IPO next year.Our worst-case scenario is that only$7 billion is generated,which is calculated using the valuations of the six smalles

79、t companies in our notable unicorns table.The venture market will feel some much-needed relief even if there are only a handful of unicorn IPOs next year.Because these startups hold so much value,their exits will still lead to distributions,feed into restarting the fundraising cycle,and contribute t

80、o the overall health of the VC ecosystem.Our base-case scenario is 12 unicorn IPOs in 2025,which assumes that 60%of the companies(20)in the table that have either already filed or are speculated to be actively planning will follow through.These 20 notable unicorns have a combined valuation of over$1

81、17.5 billion.Therefore,about$70.5 billion of exit value would be generated in this scenario.Finally,our ideal outcome would be 20 unicorn IPOs,which is in line with pre-pandemic exit activity and could create$117.5 billion in realized value assuming all notable unicorns exit.Market conditions need t

82、o be ideal for this scenario to happen,which would include steady and significant interest rate cuts from the Fed and increased appetite for new listings from public investors,so startups no longer need to take haircuts to their valuations to go public like Reddit had to.A friendlier exit environmen

83、t would encourage more startups to pursue public listings rather than remaining on the sidelines.2:PitchBooks VC Exit Predictor calculates exit probability using a machine learning model that is fed historic and real-time data on private company exits.112025 US Venture Capital OutlookRisksWhere 2025

84、s actual exit value lands will depend largely on market conditions.The strong backlog of IPO-eligible startups has grown steadily over the last three years because of sparse exit activity.Top unicorns may prefer to remain private because they have been able to easily continue raising capital despite

85、 overall stagnant venture dealmaking activity.For example,SpaceX was reported in early December to be weighing a tender offer that could increase its prior valuation from earlier in 2024 by$140 billion to a total of$350 billion.At this rate,SpaceX would not need to IPO in 2025 because of how much it

86、 is able to raise from eager investorsand it has shown no intention of doing so,either.If other strong unicorns follow suit,then only small unicorns would be likely candidates for public listings.This would lead to our worst-case scenario of$7 billion generated,merely one-third of 2024s total exit v

87、alue.The proposed tariffs from President-Elect Trump may also influence the venture market.The tariffs are anticipated to spike prices on imported goods,raise the overall costs of running businesses,decrease companies investments in innovation,and decrease consumer appetite for public listings.Their

88、 financial impact will depend largely on their severity and breadth.122025 US Venture Capital OutlookEmily ZhengSenior Analyst,VCRationaleThe secondary market is expected to play an even larger role in venture in 2025.Secondaries are mutually beneficial for investors and private companies,providing

89、longtime shareholders with opportunities to realize returns while startups extend their timelines before going public.By reorganizing their cap tables,startups can exchange early investors for long-term shareholders who are not constrained by the typical 10-year venture timeline,encouraging better-a

90、ligned interests.After all,an IPO is simply an important milestone,but VC funds often treat it as the end goal.2024 was another year of stagnant venture exit activity.The lack of realized returns pushed distribution rates down to near-decade lows,remaining in the single digits for eight consecutive

91、quarters.Selling shares on the secondary market has become a popular solution for LPs looking for liquidity,especially because there are little to no other options without exits.However,increased investor demand to purchase secondaries has also risen as cautious investors want exposure to the highes

92、t-conviction startups,leading discounts to significantly recover and climb from 37%in January 2024 to 6%in October 2024.Most of the trading volume is concentrated amongst brand-name private companies,including SpaceX,Anthropic,Stripe,Databricks,and Discord,as reported on Notice.co and Caplight,both

93、of which provide secondary pricing data.The anticipated uptick in exit activity in 2025 will likely increase secondary market transactions.Though seemingly counterintuitive because secondaries serve as a liquidity alternative,with more capital flowing through venture,LPs will have more capacity to i

94、ncrease exposure to their top portfolio companies and gain access to promising startups at a discount.Sellers on the secondary market also benefit in a robust exit environment by avoiding the post-IPO lockup period.Outlook:The secondary market will expand due to increasing demand.Median and average

95、secondary premium/discount to last VC round-50%-40%-30%-20%-10%0%10%20%30%Jan2022Mar MayJulSepNovJan2023Mar MayJulSepNovJan2024Mar MayJulSepAverage premium/discountMedian premium/discountSource:Zanbato Geography:US As of October 31,2024132025 US Venture Capital OutlookEven if LPs are finally able to

96、 realize distributions in 2025,the reality is that a single year of exits will not be enough to fully replenish their wallets.Plus,not every company will exit as soon as the market reopens.Many top startups are staying private for longer because they have been able to continue raising financing desp

97、ite the overall tepid dealmaking environment,which is much simpler than dealing with the costly and time-intensive hurdles of publicly listing.In 2024,the median age of a company raising a Series D+round is near decade highs,at 9.7 years old,further supporting the case for secondaries.As discounts a

98、pproach parity and potentially even cross into premiums,the narrative around secondaries will shift.Currently,secondaries are a way to gain access to promising companies at lower price points.Once secondaries are traded at a premium,the market will become reminiscent of the pandemic era,when investo

99、rs fear of missing out led to oversubscribed rounds and secondary purchases above market value.This trend may exacerbate investor hype for access to particular companieslike those in AIthat may artificially inflate valuations far greater than company fundamentals and widen the chasm between the top

100、performers and lower-conviction startups.The recent rise of venture secondaries funds will also provide continuous tailwinds for this market.LPs have been allocating capital to these strategies even when fundraising overall has been tepid.Multiple firms have raised multibillion-dollar funds with thi

101、s thesis,including NewView Capital,Industry Ventures,Lexington Partners,and Pinegrove Capital Partners.StepStone broke records in June when it raised$3.3 billion for the largest fund dedicated to VC secondaries.Venture secondaries are here to stay,at least for the next five or so years as these fund

102、s deploy capital and potentially become key liquidity providers and return generators for venture.RisksThe secondary market is currently not centralized or widely adopted.The multitude of secondary pricing platforms provides more transparency to the traditionally opaque private markets,though the la

103、ck of standardization on how companies offer secondaries and where they are traded will limit the markets growth.Many companies still do not allow transfers or enforce restrictions to control which investors are added to their cap table.Plus,transactions continue to be concentrated among a handful o

104、f top players.Even with increasing investor interest from this past year,the decreasing median discount is more a reflection of demand in the strongest companies than in venture overall because mediocre startups are not as actively tradedif at allin comparison.For the secondary market to continue ex

105、panding,more startups without brand names need to be included and garner sufficient investor demand.Otherwise,the benefits of secondaries will be reserved exclusively for the top 1%of private companies and their investors,and the rest of the ecosystem will have no opportunities to benefit.142025 US

106、Venture Capital OutlookCollin AndersonData ARationaleDistributions yields have been in a downtrend since their peak in Q3 2021.Distribution yields measure the proportion of the aggregate US VC fund net asset value that was distributed over the subsequent year.The most recent quarters have been some

107、of the lowest on record,approaching the global financial crisis(GFC)lows of 4.2%.Unlike the current absence in distributions,the GFC lows were emblematic of the broader economic crisis stifling US capital markets.We are not facing the same economic turmoil.Unemployment remains low,inflation is decel

108、erating,and public market indexes are posting strong returns.The recent dearth in distributions is not systematic;it is a hangover from the recent period of expedited market dynamics.From 2010 to 2019,quarterly distribution yields averaged 16.4%.Over this period,it took VC-backed companies a median

109、of 9.2 years to go from founding to an exit via public listing.Similarly,the median time between capital raises for VC funds remained stable at 2.7 years.These historical market dynamics began to shift in 2020 due to the low-interest-rate environment and the increased investor appetite for risk.VC-b

110、acked companies accelerated their timelines for public listings,dropping the median years since founding to 7.5.The increase in exit activity stimulated fund distributions,peaking at 33%in Q3 2021.The deluge of capital returned to LPs gave firms the opportunity to raise new funds at the quickest pac

111、e since 2010.When the music stopped,the ecosystem was stripped of many companies meant to fuel current distributions,and the leftovers were shackled by lofty valuations.Despite the lack of recent distributions,the average quarterly distribution yield since 2020 sits at 14.1%,near the historical aver

112、age.This is further evidence to support the theory that the drought in current distributions was caused by expedited market dynamics and not a systematic disruption.Outlook:Distribution yields will increase for the first time since 2021.VC fund TTM distributions relative to NAV10.0%0%5%10%15%20%25%3

113、0%35%20062008201020122014201620182020202220242007200920112013201520172019202120232025ESource:PitchBook Geography:US As of September 30,2024Note:Data is based on 5-to 10-year-old funds.152025 US Venture Capital OutlookThe last two years have given the ecosystem time to recover.The influx of dry powde

114、r has kept the market afloat while allowing firms to be more selective with their investments.The additional time has also given early-stage companies the ability to germinate and mature companies the time to grow into their valuations.The delay in distributions has also increased the demand for exi

115、t alternatives,leading to growth in secondary markets.As we head into 2025,we expect distributions to reverse their current downtrend and head toward the historical average.As noted above in our outlook concerning VC exits,GPs are under pressure from current LPs to start returning capital,and the re

116、set in market dynamics has finally opened the door for exit opportunities.There is a robust population of mature unicorns representing a substantial portion of venture capital,and the incoming administration plans to loosen the restrictions on M&Aactivity.RisksPublic listings are the largest source

117、of capital to fuel distributions.Understandably,companies prefer to enter the public markets during periods when investor risk appetite is elevated.The current public market environment remains sturdy.Even small caps have started to rally after underperforming market-weighted indexes,with the Russel

118、l 2000 outperforming the S&P 500 over the last year.Much of this performance can be attributed to stable employment,disinflation,and the Fed loosening monetary policy.Any change to this macroeconomic backdrop could adversely affect public markets,leading private companies to stave off public listing

119、s.Another risk to our distribution projections comes in the form of market incentives.As touched on in our Q4 2024 note on evolving fund economics,there has been a shift in incentives for private market employees.Historically,payouts for founders and employees have been tied to the companys exit out

120、come,just like investors.Recently,companies such as Stripe and SpaceX have been able to raise tender offers to compensate employees with vesting stock options.Deals such as these allow employees access to early liquidity and decrease internal pressure for companies to push for an exit.Currently,thes

121、e deals represent exceptions to traditional funding rounds caused by increased demand for exposure to these highly sought-after cap tables.However,if deals like this become more common,companies may stay private for longer to avoid the scrutiny of public market disclosures.162025 US Venture Capital

122、OutlookSusan HuAssociate Quantitative Research ARationaleIn 2025,fundraising activity will remain constrained by historically low distribution rates and limited LP liquidity.Distribution yields have hovered at near record lows,with current levels comparable to those last seen during the GFC.As a res

123、ult,the time between fundraising cycles has lengthened as many GPs choose to delay their next fundraising,particularly for smaller and midsized funds,which face the brunt of LP liquidity challenges.Also,larger,more established managers have continued to secure capital,though perhaps at reduced fund

124、sizes.High-profile venture investors have scaled back their fundraising efforts.For example,Tiger Global closed a fund earlier in 2024 at$2.2 billion63%below its initial target.Amid these challenges,the gradual recovery in exit activity anticipated in 2025 points to a possible reversal.Healthier M&A

125、 volumes and the thawing of the IPO market are expected to unlock LP liquidity,providing momentum for new fundraising cycles.This shift could help alleviate fundraising challenges for smaller and first-time funds,which have faced acute difficulties in securing capital.Only 77 first-time funds have b

126、een raised YTD,a sharp decline compared with 215 in 2023.Our fundraising projections leverage a time series framework that analyzes historical distribution data and market conditions to forecast future activity.Using TTM distribution trends,the model refines its estimates by detecting shifts in seas

127、onality and macroeconomic factors.Scenarios modeled include distribution rates of 5%,10%,and 15%,benchmarked against historical averages from 2016 to 2020,with the base case assuming 10%distribution rates.In our base case,capital raised for 2025 is projected at approximately$90 billion.Downside scen

128、arios estimate$70 billion,while upside projections reach$110 billion if market conditions improve earlier than anticipated.Outlook:VC fundraising activity will surpass 2024levels.VC fund capital raised with 2025 estimates$40$41$52$46$71$73$96$175$186$91$71$70$90$1102014201520162017201820192020202120

129、22202320242025ECapital raised($B)DownsideBase caseUpsideSource:PitchBook Geography:US As of November 16,202417COPYRIGHT 2024 by PitchBook Data,Inc.All rights reserved.No part of this publication may be reproduced in any form or by any meansgraphic,electronic,or mechanical,including photocopying,reco

130、rding,taping,and information storage and retrieval systemswithout the express written permission of PitchBook Data,Inc.Contents are based on information from sources believed to be reliable,but accuracy and completeness cannot be guaranteed.Nothing herein should be construed as investment advice,a p

131、ast,current or future recommendation to buy or sell any security or an offer to sell,or a solicitation of an offer to buy any security.This material does not purport to contain all of the information that a prospective investor may wish to consider and is not to be relied upon as such or used in sub

132、stitution for the exercise of independent judgment.2025 US Venture Capital OutlookDeployments of 2022 and 2023 vintage funds have been slower as investors adjusted their capital pacing strategies in response to market downturns and limited liquidity opportunities.This cautious deployment has contrib

133、uted to an elevated capital demand-supply ratio,keeping the dealmaking environment investor-friendly.However,as fundraising activity is projected to increase in 2025,the influx of new capital,combined with uncalled commitments from recent vintages,can relieve pressure on capital-starved startups.Ris

134、ksWhile the outlook is optimistic,several risks could dampen recovery prospects.A delay in increased distributions,paired with limited exit opportunities,may prolong the liquidity crunch.Furthermore,established VC managers,such as a16z,General Catalyst,and Accel,have continued to raise capital in re

135、cent years by leveraging their GP networks to secure outsized commitments during challenging market conditions.These funds,having already raised significant capital,may contribute less to future fundraising momentum in 2025.Additionally,our prediction does not account for the impact of outsized fund

136、s,such as the$40 billion AI-focused fund from a16z in partnership with Saudi Arabias Public Investment Fund,which is expected to close by the end of 2024 or in 2025.While these large-scale commitments will increase overall fundraising figuresaccounting for 56%of the$71 billion tracked YTD in 2024they are not reflective of the broader market challenges.